Modern capitalism is considered as the most successful form of economy (and it clearly works better than, say, communism), but it too has its flaws. One of the most glaring ones (in my opinion) is the ability for rich people to get richer infinitely, eventually resulting in what is known as "large income inequality" - a handful of super-rich people own everything and vast swaths of poor people work for scraps in order to make the super-rich people even richer.

This is baked into the system and the way current governments are handling it is by artificially limiting the system. There are progressive taxes and wealth redistribution; anti-monopoly laws; etc. Still, it all feels like just a patch.

And I got wondering - could a better economical system be designed without this flaw in the first place?

So, how do rich people get so rich? Well, through owning stuff that makes them money. A single person, no matter how hard working, can only produce only so much value per 24 hours. You can't get very rich that way. So the way that rich people get rich is that they buy things which they then rent to other people. It's the perfect scheme - the owners don't need to do anything, but the money keeps coming in, infinitely. There are various things that are being rented/loaned - real estate, cars, money itself, even companies (companies are a weird case where the company owner is renting the company to their employees, and the employees pay back with a share of the income from their work).

And this works so well because the more money you have, the more things you can buy to rent out, and your income just keeps increasing exponentially.

So my question is - what if this was explicitly forbidden? What would happen?

We start of with a typical western capitalist economy; today's level of technology.

All forms of rent are forbidden. You can still own things and keep them to yourself, but if you give them to others, you're not allowed to charge for it.

This includes lending money, renting apartments, paid parking, car rentals, etc. In essence, you cannot get money from simply owning stuff anymore. You also need to put in work.

You can however let others borrow your stuff for free if you feel like you don't need it.

You are also allowed to charge a small, reasonable amount for wear and tear. For example, if you're lending a car, that car will need repairs eventually, and you can calculate the average wear and charge that much (and, of course, gas money). Similarly for renting an apartment, etc.

In addition, if you've bought the thing explicitly for lending it to others, you can also charge a part of the original expense for the first customers, so that, say, the first 1000 customers pay off the price of your new car. After the original expense has been repaid however, you can no longer charge this fee. It's up to you to decide how many customers you will spread this out over.

Some small black market would probably exist, but the authorities would be working against it.

Would this work? I expect that if such a change would be implemented suddenly, the world would burn. But assuming we can somehow (slowly?) get there peacefully, would such a system hold? Would we enjoy a better world where everyone is more equal, or would scarcity rule and everyone be poor now?

$\begingroup$Well, just try to imagine a world in which rental apartments (or any type of housing) do not exist.$\endgroup$
– AlexanderOct 2 '19 at 17:33

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$\begingroup$I think you'd get more in-depth responses if you asked this over on economics.stackexchange.com. But my guess is it would have little effect on the status quo. The market model may have somewhat of a different structure to it, but (assuming we're sticking to capitalism) supply and demand would still reign supreme i.e. there would still be a massive disproportion between rich and poor.$\endgroup$
– b1nary.atr0phyOct 2 '19 at 17:35

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$\begingroup$If you're allowed to charge rent equal to the sum of your purchase price, how does this system prevent you from just selling the property when you run out, and getting a new one? e.g. I spend $1 million on an apartment building, I charge my tenants a total of a million in rent over however many years, I sell it and buy a new one... now I have a million in collectable rent on the new building.$\endgroup$
– CadenceOct 2 '19 at 18:37

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$\begingroup$There are multiple misconceptions about economics that form the basis of your question, which make it hard to give a good answer. The two most glaring ones are that you think "value" is objective (it isn't), and that the beneficiaries of income inequality are static (e.g. "the rich" might get richer over time, but "the rich" is a group whose membership changes frequently). I may expand this into an answer later.$\endgroup$
– JoeOct 2 '19 at 19:53

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$\begingroup$You trotted out the standard socialist shibboleths abut "the rich" and "the poor." But you don't have the slightest particle of support for them. For example, renting something is cheaper than buying it, so under many conditions it is a net benefit to the renter. So preventing it would make the renter poorer.$\endgroup$
– puppetsockOct 2 '19 at 20:01

12 Answers
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Nothing would change.

In this world, the CEOs of large "free-lending" companies would make millions on repair fees, gas fees, and any other kind of reimbursements simply by charging them more than it costs to fix it.

Even if charging the customer more than it costs to fix it is not allowed - which prevents profit - money will always be used to make more money. Money that goes into research and development leads to better products, which people then purchase, which gives the company more money, etc. And the poor folk will have no money for research and development.

As long as companies are able to be created, as long as people can have different amounts of wealth based on the services they are able to provide - an equal society won't happen.

$\begingroup$totally agree that people will find a way to make money in any regime.$\endgroup$
– Bald BearOct 2 '19 at 17:55

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$\begingroup$Well, yes, I was thinking about preventing profit. Or rather - the profit would have to be distributed equally among the employees.They are the ones who did labor to earn the cash, so they get to keep it, not some uninvolved company owner.$\endgroup$
– Vilx-Oct 2 '19 at 17:55

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$\begingroup$@Vilx- If the company owner doesn't make a percent of profits, then there is no reason for people to start companies. Then people will only work for themselves, and this would cause technological development to come to a halt. There would be no organized...anything.$\endgroup$
– overlordOct 2 '19 at 17:59

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$\begingroup$"Well, yes, I was thinking about preventing profit. Or rather - the profit would have to be distributed equally among the employees." This is the overarching plot of Atlas Shrugged. It doesn't end well for most of the characters.$\endgroup$
– RenanOct 2 '19 at 19:32

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$\begingroup$@overlord That's only true if the new hire doesn't offer enough marginal productivity to justify their hiring in the first place, which is similarly true with most income distribution schemes, and isn't fundamentally prevented by uneven income distribution or rents. Organization would still happen, it just wouldn't be the same as organization around the higher profit motive.$\endgroup$
– Upper_CaseOct 2 '19 at 19:52

Practically any infrastructure is no longer able to be private and rented to multiple users. It actually encourages monopolies, as vertical integration of services is the only viable model in order to avoid being accused of renting.

$\begingroup$Not really outlawed. You're just not allowed to make a profit from them. You are welcome to charge whatever costs are necessary maintain and improve the things - but not adding a profit margin. Basically, all businesses become non-profits.$\endgroup$
– Vilx-Oct 2 '19 at 21:56

$\begingroup$@AlexP - not if you think of how many modern non-profits operate today. sure, the corporate entity doesn't "earn a profit" but they do pay employees, benefits, etc. Heck over payment of executives is one of the things that must be watched out for when selecting a legally non-profit charity for donating to. And even non-profits can earn money this year and save it to spend in the future for things like building infrastructure, etc. Might want to read up on what a "non-profit" really is...$\endgroup$
– ivanivanOct 3 '19 at 1:22

$\begingroup$Compromise answer: not outlawed, just slowly dying out. And if anyone opens a new one (or puts serious effort in maintaining old ones), that should cause an alarm on nearest police station - either as criminal scheming to circumvent those regulations on grand scale or as person being direct threat to himself and others. ;)$\endgroup$
– Shadow1024Oct 3 '19 at 5:58

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$\begingroup$@ivanivan There's a huge difference between "largely for-profit businesses, with a few non-profits here and there" and "every business is non-profit". Even if you assume everyone is perfectly honest, there's still a limit to how much money you invest in a business if you're not expecting anything in return. One of the big misconceptions that most socialist thinkers had was that the population is separated into a "lender class" ("capitalists") and a "borrower class". But in reality, pretty much everyone is both a lender and a borrower (just like most people are both producers and consumers).$\endgroup$
– LuaanOct 3 '19 at 8:51

The question deeply misunderstands and misstates a large variety of economic conditions.

First, the notion that in capitalism the rich get richer and the poor get poorer. This is grossly false. In capitalism, everybody gets richer.

The most important graph in the world shows us this. And Gapminder's fantastic graphs show us the data in splendid animated beauty. Before capitalism, personal material wealth was stagnant for centuries, for millenia. Now it is possible that within two decades there will be almost nobody poor. And those who are still poor will almost exclusively be in non-capitalist countries.

The notion that there are strict limits on production of wealth is simply wrong. Wealth can be leveraged, produced in bulk. 1000 years ago, the wealth of the poorest populations in capitalist countries would have been beyond the reach of the most resplendent emperors.

It's not any "1 percent" that owns the wealth. How many houses in the USA? How many bank accounts? How many pension funds? How many iPhones? How many personal computers?

The notion that people would be better off if renting was prevented is simply risible at best. Renting is cheaper than buying, so in many situations it is a net benefit to the renter. A net financial benefit. Banning it would make him poorer. The fact it would make a property owner poorer also can only be attractive if you like hurting people.

Giving a government the power to prevent such financial benefit is giving them the power to destroy. Nobody will be better off, and many people will be much worse off. The very best you can hope for is stagnation. But the expected result, from looking at countries that try it, is mass murder. From Hayek's Road To Serfdom, to the tens of millions in the former USSR, to the tens of millions in PRC, to the killing fields of Cambodia, to the dreary list of horrors to be found in The Black Book of Communism, there is no apparent end to how horrible it will get.

Edits in response to comments:

Poor defined as "not having enough money to eat, put a roof over your head, or buy clothes" may well nearly disappear within 20 years. Not just because of PR of China, but also India and South America and Africa embracing capitalism. This is why I referenced Gapminder, since that's what the data shows. It isn't 13% raised out of poverty. On that definition it's closer to 40% in the last 40 years.

40 years ago the per-capita income of the world had a bulge at the high end, a long low valley in the middle, and a big bulge at the low-income end. Now that low-end bulge has nearly disappeared to be replaced by a huge bulge in the middle, with the upper end increasing just a little. Everybody is getting rich.

Poor defined as "can't afford to send children to school" is also disappearing. For the same reason, same source. Literacy is penetrating nearly everywhere. Even cell phone access is penetrating nearly everywhere. Instead of children being seen as sources of labor, they are seen more as they are in the west. Because the productivity of individuals is being raised by capitalist investment, so that they can afford to let their children have a long childhood. In many places for the first time.

As to everybody getting rich being part of all systems. No, absolutely not. For millennia the human race was stagnant. That's the graph and why it's important. The moment capitalism was invented we started on exponential improvement of the human material condition. And only in countries that embraced it. Every conceivable form and flavor of government and society was tried, repeatedly and in many different cultures, for millennia. Only capitalist countries ever produced mass wealth.

As to what's up in China. The parts of the economy that are performing are the parts that the communists are most leaving alone. The parts that are unstable, having huge trouble, or failing entirely, are the parts they have their hands on most. Contrast the "special economic zones" with anything outside them. And note which way the people of China are trying to migrate. (It's into the SEZ as fast as they are allowed.) This is the effect that makes the advances in China most precarious. As is true in many western countries. The moment the government messes with an economy is the moment the economy gets messed up. It's also why I referenced Hayek, who first showed us this fact.

$\begingroup$It never ceases to amaze me that people can't read things the other way around - can't lend money means you can't get a loan. Can't rent out property means you can't rent an apartment, or a location for your small business, or a car, or that heavy equipment you would need to clear land to build your own building because you can't rent one... The axe swung in secret jealousy of "the rich guy" ends up embedded in your own leg.$\endgroup$
– JedediahOct 2 '19 at 21:04

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$\begingroup$@Hypnosifl: Yes, if we exclude the greatest success story in lifting people out of poverty then we find that we have excluded the greatest success story in lifting people out of poverty. You can make similar graphs for the production of electric vehicles excluding Tesla, number of people who went to space in the last decade excluding those who travelled on a Russian Soyuz rocket, number of smart phones excluding iPhone and Android, number of digital cameras excluding those with Sony sensors, percentage of data stored on solid-state devices excluding Intel and Samsung, etc. etc.$\endgroup$
– AlexPOct 2 '19 at 22:56

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$\begingroup$@AlexP - Are you talking about the success of capitalism in reducing poverty, or China's system? If the latter, do you see that as confirming or complicating puppetsock's argument that capitalism is the best way for everyone to get richer? China is described as a socialist market economy with extensive state ownership of many enterprises, so if it does significantly better at lifting people out of poverty than traditional capitalism where most business is privately owned, I'd say it complicates puppetsock's argument.$\endgroup$
– HypnosiflOct 3 '19 at 0:31

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$\begingroup$GDP in the US goes up when more people are in debt (e.g. education), sick (hospitals), killing each other (military), or in prisons (privately run). It also goes up even if the poorer get poorer but the richer get richer at a higher rate. Sure, in practice it is still one of the better indicators for a country's wealth, but high GDP strongly does not mean "the poor are getting richer".$\endgroup$
– Francisco PresenciaOct 3 '19 at 1:56

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$\begingroup$"Everyone gets richer" is inherent to ALL systems. Even dreaded communism. This is baked in not economic system but scientific progress.$\endgroup$
– Zizy ArcherOct 3 '19 at 6:57

Plenty of people tried to come up with a better economic system than capitalism, but without much luck. So you are in good company here :)

There are a few problems with your scheme.

You have just killed the reason to invest into anything. Economic growth and technological progress rely on investment, i.e. people renting capital to businesses, in return for interest or stock price growth. In your rent-free world, keeping money in the bank (or in a jar) has same return as investing, and is easier and safer. So no startup will get funding, and firms cannot raise money to upgrade to 5G cellular network.

What about owner-operated business? The building and equipment belong to the owner, who also works as CEO, other workers are hired. Do you pay the CEO the "reasonable CEO wage", and take away the rest of the profit as tax? There is no way to determine reasonable CEO wage b/c each business is different, and every person has different skill and effort. And profit is the main motivation for owner to do their best. Fixed salary=fixed effort.

What about elderly people? They cannot work anymore. In typical market economy, people save some money or other assets while they can work, and then rent them to young workers when they retire. In your world, retired people can still sell their assets, but that limits their quality of life.

Paid labor is essentially renting one's time. I guess you exclude that, but the line between thing and labor is blurry. What if you rent out a house, but also provide lawn care and other maintenance? The renters should pay you for your labor, but how much? Different houses require different amount of time and effort to maintain. And house can be maintained at different levels, from spotless luxury to barely habitable.

What is the "reasonable amount for wear and tear"? Even annual "oil change" on a car is actually a maintenance that can include (or not) several different things. Also, Do you charge for deep-cleaning the car every month, vacuumed once a year, or let it become soiled?

Rental fee should also include the risk of rented item being destroyed. E.g. car crash. I guess you can get insurance rate for that. But insurance never covers 100%, and you might know the renter better than the insurance company.

I also need to think some more about inflation. Your setup is not banning it explicitly, but you do ban bank interest, and that will reduce inflation, maybe even to zero.

$\begingroup$Wide company, not good company. The OP is in company with such diverse people as Mao, Stalin, Pol Pot, etc. etc.$\endgroup$
– puppetsockOct 2 '19 at 20:03

$\begingroup$@puppetsock - Nah, communism pretty much has proven that it's a failure. The end of private property is not what I'm suggesting here. People can still own stuff like before - just not profit simply by the virtue of owning them. In other words, you can be paid for work, and not doing any work means not getting any pay.$\endgroup$
– Vilx-Oct 2 '19 at 21:58

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$\begingroup$@Vilx - If you don't want people to make profit just from owning stuff, why doesn't this imply the socialist conclusion that people should not be able to profit by owning "means of production" (machinery in factories, for example), and paying workers a salary to use those means of production to make goods? One can argue the owners of the means of production are still contributing something by assuming the risk that the goods they choose to pay workers to manufacture won't sell enough to make a profit, but the same would be true for people who buy and fix up real estate in order to rent it out.$\endgroup$
– HypnosiflOct 2 '19 at 22:31

$\begingroup$@Vilx What about elderly people? They cannot work anymore. In typical market economy, people save some money or other assets while they can work, and then rent them to young workers when they retire. In your world, retired people can still sell their assets, but that limits their quality of life.$\endgroup$
– Bald BearOct 3 '19 at 2:03

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$\begingroup$@Vilx- The problem is that you've learned that "communism is a failure", but not what communism is, and why it was a failure. The arguments you're using are exactly the same the Marxists used, and they claimed it would lead to great prosperity for everyone. You're also assuming that there's already an all-powerful state that can take of the elderly and the sick; but how is that funded? Who builds the houses for people to live in? The only way without capitalism is to have the state do everything, and thus have complete power over the people. This is the same trap all socialism falls into.$\endgroup$
– LuaanOct 3 '19 at 9:05

The interest is what makes granting a loan to someone else interesting.
There is no reason to lend money to someone, when you can only get an equal amount back, or if you are unlucky lose your money because the other person turns out to not be able to pay you back.

The same is true for renting rooms / appartements to others and so on.

There is no reason to do it, if it doesn't pay off in some way. That is how humans are.

But it does not need to pay off in money. It can just as well pay off in social status. Right now, a lot of money is spent to buy stuff not for its usefulness or its beauty, but as a symbol of status.

The higher your social status, the more mates you can choose from, and that's what it's all about.

So you would need a society where borrowing stuff to others for only the costs it produces and no profit is considered to be sexy. The more you give away, the sexier you are, the more mates you can choose from.

$\begingroup$"There is no reason to do it" is too strong. But it definitely means you have only a tiny fraction of investment you would otherwise have, and people are poorer as a result. If you spend money on stupid things just for some social status, you've prevented that money from buying capital in some business that could have made, say, bread cheaper. Bad investment is worse than no investment, though the mainstream Keynesian economic theory seems to have trouble grasping that concept.$\endgroup$
– LuaanOct 3 '19 at 9:08

Let's try working through this. By the way, this was codified in Deuteronomy by Moses and supposedly practiced by pre-monarchy Israel in antiquity, but the specifics on how this worked out aren't well recorded.

For small businesses, loans could still be made, but would have to be done without interest. Seed money can come from personal savings and benefactors.

Mid sized businesses can also exist. The most primitive definitions of non-slave labor are like contracting: payment per some unit of measure - day of work, goods delivered, goods manufactured. To keep it rent free, the tailings would be available for the poor and strangers to pick over. Use case: the grower gets first pick at the harvest, but cannot deny access to whatever is left behind (because harvesting is generally not a 100% successful operation). The grower can not deny access to the leftovers to rot in order to protect the price of the crop - what is left behind (past a certain recognized harvest period) is considered abandoned and becomes public goods.

In practice, turning fields into public good created a crime problem as suggested in the book of Ruth - bandits would hide among the fields to ambush and abuse people trying to collect the leftovers.

As to industry - who owns the winepress I set up? It was not, in fact, uncommon in antiquity for someone to build and abandon (or gift to the community) a small piece of public infrastructure. You can probably see, however, that this will have problems scaling up from the simple well or olive press. It's not a violation of the no rent rule, possibly, for a family to personally operate their own press and insist people allow them to perform the labor for a fee.

How would trade work? If you entrust your goods to a trader to take across the continent for trade, when are those goods considered abandoned or rent? I would guess, as with infrastructure, it slips into the public good as soon as you give up working it... Therefore, families would have to cart their own goods to market.

Large industry would be possible. It could take at least two forms: large trustworthy families (think the Medicis) actively managing (and keeping control of) a widespread operation. Or, one or more investors could entrust operation of a large facility or network to a group of managers, who technically now own the piece of tooling or goods (thinking ocean-going trade ships or light factories), and can reassign (on their retirement) the goods and property to someone else. This might be done by a large wealthy family because they want to accomplish some goal : open a trade route, create a sub-assembly supplier. Auto companies have actually engaged in this in near history.

An important distinction from this rent-free society and the Medici model is that there would be no legal recognition of a patriarchy, matriarchy, or manager-of-managers. You may choose to adopt this idea or not - but to remain rent-free, I think, your society would need to consider any attempt to contractually obligate a family into in any kind of involuntary role operating on behalf of a "director" to be some sort of rent-seeking.

The key distinction here, I think, is this: no individual's legally-recognized assets may grow beyond what one human being can directly work with on a day-to-day basis.

In addition, I think you might have trouble with trade groups or prices attempting price, volume, or quality manipulation. You'd need laws governing those behaviors.

Intellectual property would need to be considered, or not exist. Without government protection of the ownership ideas you have an environment of tightly guarded trade secrets that masters regularly take with them to the grave. Perhaps government could secure an inventors ownership of an idea for some period or life (as is currently done), but require the inventors to be an active participant in the development to market and operation of the idea in order to keep the idea from slipping into the public domain.

Hotels might not exist. The primitive options for travelers were an expectation that every towns' citizens either opened up their homes for visitors (see the last chapters of Judges), or public housing was provided. Such guest houses even provided meals without charge, but you might decide they could charge for food and entertainment.

Insurance (pooling bets against actualized risk) would still be possible as an industry. Professional insurers (making their income by investing the pool) would still be possible, but the investment options would be more limited in goods and services that the insurance professional can personally take to market and sell profitably.

$\begingroup$Ok, let's see... I don't follow you about the trailings and industry, could you please elaborate? About trade - I don't see a problem. The trader would have to buy the cart of food from you. Then he takes it to the market and sells it for a profit. Isn't that how it's done today? You can, of course, have an agreement with the trader that he pays you back later, but that's up to you and does not violate the no-rent rulem$\endgroup$
– Vilx-Oct 3 '19 at 6:39

$\begingroup$Intellectual property is another pet peeve of mine. I dislike the very idea of it. But that's a topic for a whole different post. I could go along with a short-term protection (say, no more than 5 years) and still no renting of said property. If you have a great idea but cannot execute it, then move over and let someone else do it who can. You can sell your ideas, but for a fixed fee only, not royalties.$\endgroup$
– Vilx-Oct 3 '19 at 6:42

$\begingroup$I don't think hotels would suffer. They cannot charge for simply renting the space, but they can charge for all the services they provide (room repairs, cleaning, food served, etc).$\endgroup$
– Vilx-Oct 3 '19 at 6:45

$\begingroup$Wonderful - you've just explained how Vilx-'s proposal would naturally turn into syndicalism, and the poor would be even poorer while the rich would be even richer. Instead of rich people investing in a way that ultimately makes the poor richer (better work efficiency, cheaper products etc.), you create a world where the rich families keep all their wealth to themselves, while the poor have no chance to ever stop being poor, since they can't get access to any capital they can't get as a donation or make for themselves. Welcome back, medieval aristocracies, with far greater power than ever!$\endgroup$
– LuaanOct 3 '19 at 9:12

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$\begingroup$@Vilx- about trade, many of the most profitable trade routes involve a long distance from a market where a product is plentiful to a distant market where that good is rare (and can be sold for more). In modern terms, goods are shipped from cheap manufacturing centers in asia half a world away to be sold. In antiquity this was true also (trade caravans). However, to do this, either you personally, or a trusted person must take custody of your goods for that journey (and possibly purchasing rare goods at the destination to sell on return).$\endgroup$
– James McLellanOct 3 '19 at 12:31

You're trying to "fix" things from the top down. That's just like communism, fascism, etc... it doesn't work. We have the ghosts of a hundred million people telling us it doesn't work.

People are people and will do people things no matter the threat screamed at them or treat dangled in front of them. Going against human nature only succeeds in bringing unnecessary suffering into the world.

If you want to change the economic outcome in your world you'll have to take into account human nature. So, you'll want to find for your world a living breathing example of the outcome you want.

My example is the apocryphal story of a sushi restaurant in New Zealand.

One day, after lots of preparation and hard work, a couple opened a sushi
restaurant in Aukland. Word got around that they were great. After a
few months they did so much business they could meet all their
financial goals for the week by Wednesday. So, they'd take the rest of
the week off. Still, their success grew. Eventually they did enough
business in a few years they could retire. And they did. They closed
down the restaurant, bought a nice bungalow on the beach and happily
drank beers and watched rugby until the end of their days.

This is what you want. Make people want just enough to make themselves and their immediate loved ones happy and comfortable.

How?

Culture sculpting. Movies, stories, songs, etc...

Make egregious luxuries and gratuitous wealth just in bad taste and bad tasting. "Why would I want a new car? My 10 year old honda works just fine."

Make inheritance seem ugly and insulting. "Why would I give my children a lot of money? If they can't earn it themselves they'll waste it." (Jackie Chan has basically said this) This is the real lynch pin to reducing income inequality. If you don't have static and sterile cesspools of wealth not creating value, but only creating more money then it's free to move around and do actual work.

Sure you'll get people addicted to creating businesses and wealth because you haven't gotten rid of the inherent benefits. Still, you'll severely undercut rent-seeking (which is what you're trying to get rid of) because IMHO rent seeking is a greed fueling behavior.

$\begingroup$Having an ample supply of "people addicted to creating businesses" is a good thing for anybody who needs a job and doesn't have the necessary skills to create a business of their own.$\endgroup$
– krbOct 2 '19 at 20:48

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$\begingroup$I've never heard about rent-seeking before this. I read the Wikipedia article now and... I kinda find it hard to draw a line between "normal rent" and "rent-seeking". If I own a plot of land that I'm not using myself, and I'm letting people leave their cars there for a fee (aka a paid parking lot), is this really any different from the "chain across the river" example that was mentioned in the Wikipedia article?$\endgroup$
– Vilx-Oct 2 '19 at 22:19

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$\begingroup$Inheritance apparently wasn't a thing in Ancient Egypt (what with the dead taking their posessions into the grave and all that), so there's definitely a precedent. Parents didn't own their kids anything as soon as they became adults, and vice versa. Our western culture is a bit weird.$\endgroup$
– LuaanOct 3 '19 at 9:14

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$\begingroup$@Vilx If you tarmac the plot of land, mark out spaces for parking, hire attendants to ensure security and cleanliness, then you have added value over just parking in a field where people would have to squelch through cowpats and risk their car being damaged, stolen, or blocked in. If the river was formerly impassable because of low-hung trees that the landowner arranges to trim, or because it was full of silt that he dredged, then that changes the situation.$\endgroup$
– ChronocidalOct 3 '19 at 9:34

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$\begingroup$@Vilx- And now you've found the central problem of economics. How do you set prices and wages? How do you value capital? "Reasonable" is one of those words that is completely vacuous, but sounds like it has some information value to humans. I might be over-generalizing, but I'm pretty sure that almost every socialist and protectionist measure ever devised talked about allowing "reasonable" profits, "reasonable" wages, "reasonable" prices... without ever being able to define what that means. Ultimately, you can't - because people's values are subjective.$\endgroup$
– LuaanOct 4 '19 at 12:55

A partial example from actual history: under Mosaic law, you were not allowed to charge interest on loans (except to foreigners). In fact, if they weren't able to repay the loan, you were required to forgive the remaining amount after a certain amount of time.

Note that this is just for loans -> not rentals and labor and other things.

Did it work? That civilization lasted for more 600 years... which is pretty good. On the other hand, I strongly suspect many didn't obey that part of the law.

$\begingroup$Muslims do this too. I think it's wonderful, the bank purchases the house and takes your payments until it's over. No room for mortages, no room to mess up your finances, also no extra safety net with living in your assets. learnreligions.com/islamic-mortgage-2004112$\endgroup$
– kleer001Oct 3 '19 at 16:50

4

$\begingroup$A cousin of mine worked for banks that operated in the Middle East explained to me that while a loan is gussied up to be theologically acceptable to people in the region, the interest is just rolled up into various fees. Perhaps things are different on small loans like single family home mortgages (though my understanding is that they are not), but commercial/industrial/state loans were effectively identical to Western-style loans.$\endgroup$
– schadjoOct 3 '19 at 18:47

$\begingroup$@kleer001 does the bank charge a fee for this service?$\endgroup$
– DrMcCleodOct 6 '19 at 8:02

$\begingroup$@DrMcCleod I don't know off hand. I'm sure it varies, a little research could easily clarify the issue.$\endgroup$
– kleer001Oct 7 '19 at 19:40

Unification

Well, you are partly on the way to working out the system I am building, called "Unification". You have correctly identified ownership as a major cause of wealth and income inequality in capitalism, but a full reformation of free markets must go beyond abolishing ownership, and address the other glaring defect: capitalism has one virtue, which is freedom. That is, you are free to do anything that isn't forbidden, whether it actually helps society or not. The theory is that enlightened self-interest will naturally cause people to punish bad actors and reward good actors. Of course, that theory depends on humans being rational actors, and we have far too many examples demonstrating otherwise.

So the defining principle of Unification is goodness, as in "make people good" rather than "make people free." There are many currencies in this system, but the discretionary currency, which I call Social Credit, is designed to be an explicit measure of the value which one contributes to society, rather than just yourself (capitalism assumes that helping yourself will ultimately help society, but fails for zero-sum games).

Ownership

In capitalism, money creates money. That's why poor people work and rich people relax. The only difference between a poor black dude sitting at home collecting welfare checks and smoking blunts and a rich white dude sitting at home collecting dividend checks and snorting coke is that one was born poor and the other was born rich. Capitalism is completely ambivalent about these outcomes, in general. So to prevent people from mooching off inherited wealth, you need to eliminate wealth that produces wealth. You need to eliminate ownership. I replace it with something called Stewardship. Strict ownership is only possessed by the Unity, which is all of society together. Whenever someone creates an artifact, they consume resources owned by the Unity, and pay a use fee for as long as the artifact exists. However, they also become the Ultimate Steward of the artifact, and are legally responsible for its entire lifetime. When it is no longer usable, they are responsible for deconstructing it and returning its raw materials to the Unity.
Obviously, consumable items are consumable, and are the only artifacts for which stewardship can be fully passed to the consumer.

So, contrary to your idea, Unification doesn't eliminate rent, it rents everything. This has nice effects, however. If we think about products today, many of them are built with planned obsolescence, whether manufacturers admit to it or not. If you want a society that saves energy and resources, then you need to incentivize manufacturers to make artifacts as durable as possible. Capitalism doesn't reward creating products that last, because once a sale is complete, the capitalist no longer has a connection to the artifact (modulo returns, etc.). Under unification, the manufacturer does not get their entire investment back at sale time, because there is no sale time. Rather, they get a recurring return via the use fee ("rent"), which now incentivizes them to make products last as long as possible, especially since they must also pay for deconstruction at end of life. The construction and deconstruction costs are mostly fixed, but they can increase their profits almost without bound by improving durability/lifetime. Of course, more durable products are also good for consumers.

Furthermore, the accelerating rate of change means that you can't create a product today and expect it to be current in 20 years without changes. So manufacturers are also incentivized to make products modular and upgradable.

Zeitgeist

There's a movie trilogy called Zeitgeist which is full of conspiracy theories and some other nutty ideas. But it has the honorable goal of presenting a society which is "post-scarcity". They focus excessively on money, even though money, per se, isn't the root evil. They try to make everything free, declare that people no longer have to work, and that AI will save us all by allocating resources fairly and intelligently. Needless to say, I think this is hopelessly optimistic. Not only do I think humans want to work, this model tells us nothing about how to get from here to there.

But "post-scarcity" is a valuable concept. Unification recognizes that some goods are "exclusive" (like an ice cream cone), while others are "non-exclusive" (like a digital song track). To that end, consumers only pay for exclusive access. That is, money is only used to de-conflict competing access claims for artifacts that can only be used by one person at a time (like clothes). So how do artists get compensated? Well first, let's talk about basic needs.

Medicare For All

Society today has reached a point where people are beginning to consider truly universal health care. But in a society of the future, where the goal is to make everyone as productive and happy and healthy as possible, this is simply a non-negotiable requirement. Under Unification, not only is health care free, so is education, housing, food, transportation, communication, power, water, and everything else a person needs to survive and thrive. That being said, there are still tiers and markets. The defining concept here is "Baseline". This is similar to Universal Basic Income, except much less free and much more precise. What Baseline provides is a solid 3000 calories per day, with the full complement of micro-nutrients. All food has a dual-price structure, where some portion is priced in BreadCoin, which is the baseline currency for food, and the rest is priced in SocialCredit. The BreadCoin portion is derived entirely from the nutritional content of the food (macro+micro nutrients), with healthy food having high value and junk food having low value. Thus, a raw peach might have a price of 200 BC + 0 SC, reflecting the fact that it is highly nutritious and has no value-add beyond growing and harvesting it. Whereas, a bag of chips may have a price of 20 BC + 500 SC, reflecting the fact that it's mostly empty calories with a bad micronutrient balance, combined with the fact that it's designed to be addictive. So, this causes healthy food to be cheap, and junk food to be expensive. You still have markets, free food, and luxury food, but you skew the incentives towards positive outcomes.

Now, the BreadCoin is not funded via taxes. There are no taxes in Unification. Instead, BreadCoin is created on demand. Yes, you just make up money ex nihilo. This sounds insane, until you consider that this is also how private bank loans are created under capitalism. No, really. Look it up. In particular, look up the difference between M0 and M1, and think hard about what "broad money" is. Now, when the BreadCoin is paid to the grocer, it gets converted into SocialCredit, because the grocer/farmer have done a social good. So we feed everyone by printing money. Oh noes!!! Runaway inflation, right? Well, no.

Land

As you can probably guess, we pay for all Baseline services in the same way: we print money like madmen. And the provider receives compensation as SocialCredit. So how do we prevent inflation? Well, one of the other glaring holes in capitalism is that it's not a closed system. Anything without a price is an "externality", like clean air, clean water, biodiversity, quiet. Unification, on the other hand, is a closed system. Every resource has a price. Furthermore, land is very expensive (and owned by the Unity, of course). So land rents alone can act as a money sink. But power and raw materials are also "owned" by the Unity, and so those will also soak up excess currency.

Critter Corps

Now, when we say that "biodiversity has a price", what the heck do we mean? Well, today, only 10% of land animals are "wild". The rest are domestic, meaning "food animals." Yeah. We killed the majority of wild animals so we could eat burgers and ham. That's not even talking about fish. And the problem is that wild animals are not economic agents nor priced assets within capitalism. Under unification, they are that and more: they are full members of the economy. So when we ask the question: "How much habitat should wild animals get?" we are at a loss for a principled answer. The unification answer is: "All species should be allowed to achieve their natural carrying capacity". So if deer can survive at 30 individuals per km^2, and humans could survive at subsistence at 3 individuals per km^2, then that is the "natural carrying capacity" for those species (which, of course, varies by biome).

Obviously, some species are over-populated, while many are under-populated (threatened, nearly extinct, etc.). Instead of land being traded only by humans, land is traded by all living things, with corporations acting on behalf of non-human species. Each species is represented by some corporation (with many corps representing large taxa of related species). And each corp receives a "land entitlement" inversely proportional to their population load, which is current population / carrying capacity. So if deer are over-hunted and only at 50% capacity, then they get 200% of the default land entitlement due to reduced numbers. Endangered species get massive entitlements. Humans get a pittance.

Naturally, this forces humans to give up huge tracts of land, mostly farms, and concentrate in cities. This also forces us to grow nearly all food indoors, in massive urban greenhouses stacked 20 stories high. On the other hand, wild species would rebound significantly with the retreat of human development. And now you see why land is so expensive.

Knowledge

But how do we guarantee full employment, which capitalism cares nothing about? What about "the useless class", as some Silicon Valley venture capitalists like to say? Well, with long-duration goods, we can no longer rely on manufacturing to save us. But we still need to put people to productive work. The only thing of last value that we can produce with excess capacity is knowledge. And thus, we drive the economy from the top by creating demand for knowledge until we get full employment. That is, we generate research grants and employ Ph.Ds and incent folks to increase their education until every last economic niche is filled. And yes, we pay for those grants by printing money ex nihilo. Fun!

Ok, so we are creating knowledge willy-nilly, but we are also giving it away for free!!! How the heck do we stimulate economic activity if all music and media is free? Well, we compensate knowledge creators by paying them any time their knowledge is accessed. So musicians get 1 SocialCredit for every minute their song is streamed to a consumer. Yeah, that adds up fast. Researchers get 1 credit for every minute that someone reads their paper. A product reviewer gets 1 credit for every minute that a shopper reads their review. And where do these credits come from? We print them on demand!!!

But what about derived knowledge? A research paper is built on the results of dozens of other papers. For that, we build a massive Attribution Graph. This is a global distributed database (blockchain) which links all knowledge by reference/bibliography. When a paper cites 10 other papers, those citations generation "downstream attribution credits". So the primary author gets, say, 60% of the total revenue, and the remaining 40% is divided among the references in the paper. All knowledge must attribute contributing sources, and thus, credits will flow throughout the entire knowledge graph. Writing one widely cited paper can throw off massive credits for the rest of your life. And thus, researchers don't even need to be paid a salary. They can be expected to earn all their income from research credits!

Corporations

As you note, share ownership under capitalism is highly inequitable. Capitalists are allowed to gamble with other people's labor. Under unification, every shareholder is an employee and every employee is a shareholder. Furthermore, wage slaves exist under capitalism, because it lets poor people trade away all risk in return for fixed income. This is necessary if you are poor because being poor reduces or eliminates your risk tolerance. With baseline, everyone has the same risk tolerance. Some people live better than others, because they spend their SocialCreds for above-baseline housing, food, clothes, etc. But nobody goes "bankrupt", even medically. At worst, you lose all your credits, and have to live at baseline. You still get total medical care and all the education you need to start your next venture.

Unification forbids wages. All income is generated as shares of profit. All "partners" share in revenue risk, and so they are all invested in the corporation. To prevent capitalist shareholders joining several corporations but only actually working at one of them, there is an additional provision that you only earn profits from hours worked and logged. So in this respect, everyone is also an hourly worker. If someone who fancies themselves a CEO wants to join 10 corps, they are free to do so. But they will only earn the income of one corp, because they can't work 40 hours a week at 10 jobs. Also, few corporations would be willing to hire someone who can't put in a reasonable number of hours.

Conclusion

Unification also has dozens of other systems in place to repair the defects of capitalism. Is it capitalist? No. Yes. Is it communist? No. Yes. Is it socialist? No. Yes. I mean, there is no private ownership, but it's driven by markets, and "the state" provides for every citizen. So it's kinda "all of the above". I didn't even get into the legal or political system, but one could even make a case for anarchy being a component. Anyway, if you want to know more, I can explain it, but this answer is already way too long. ;)

$\begingroup$"Well, today, only 10% of land animals are "wild". The rest are domestic, meaning "food animals." Yeah. We killed the majority of wild animals so we could eat burgers and ham." There's so much wrong with these sentences that a comment isn't long enough, but to start with: the only way that 10% claim could be true is if you ignore 4.4 x 10²⁰ nematodes. If you meant mammals and birds, then raising 4 chickens doesn't inherently kill 4 wild mammals or birds.$\endgroup$
– Peter TaylorOct 3 '19 at 8:25

$\begingroup$@PeterTaylor Perhaps comparing old numbers of animals against new numbers of animals is an additional statistic that needs including. After all, if we have over 10 times as many animals now, that means we've increased the number of wild ones. (100% of people I asked say that purely using percentages can be highly misleading - that's all 1 of them!)$\endgroup$
– ChronocidalOct 3 '19 at 8:34

$\begingroup$This... is waaaay beyond anything I had in mind. I find it even hard to wrap my mind around it. I'm not even sure if this is serious, or a setting for novel called "1984 v2". By the way, who sets the prices?$\endgroup$
– Vilx-Oct 3 '19 at 8:34

1

$\begingroup$@Vilx: "Who sets the prices?" You hit it in one. This is one of the fundamental problems of socialism / communism, identified as such by economists. In the absence of a free market, there is no feasible mechanism to set prices, which means that there is no way to know how to allocate resources...$\endgroup$
– AlexPOct 3 '19 at 9:15

In modern times, there are very few professions that can continue to exist without some type of renting. Moreover - every single business that is not a one-person company has just been outlawed. Why?

Because by working you esentially rent your empolyer's equipment and vision and add your own time to earn a share of their profits.

We also rent all kinds of infrastructure - electrcity, gas, petrol, water, internet, telephone all comes in form of renting. And we also rent things and money directly - loans to start your company because you need the equipment, renting the equipment itself (if it is, for example, a costly farming machine).

The one thing you forgot that is not free is time itself.

A person that has earned their money from scratch, invested their time to get there with work.
A person that has multiplied what they started with (for example, a small bakery) has spent time to find ways to achieve it (better baking equipment, better sales plan, promoting products, investing etc).
Getting to the point where your assets bring you more money than you spend is not sitting in your chair doing nothing - it's looking for the right people, finding the right strategy, creating new ideas for products that will turn profit.

If you take away the reason to spend your time to lessen your workload, people will turn to pleasures like food and alcohol instead of work because why would they bother doing something that brings them nothing?

Can modern society live with such limitations?
From me, that's a hard no.

Would we enjoy a better world where everyone is more equal, or would scarcity rule and everyone be poor now?

You'll never magically get rid of inequalities. Capitalism, socialism, communism aren't simply economic systems, they're also political. It's not just about money, it's also about power. Doesn't matter what system you can dream up, someone will always profit more.

So is it pointless? Well, no, you can always make things "better".

Rabbit holin'

I want to challenge a few things in the premise. And I promise this is going somewhere in the end.

But before, let me preface with this: this is fiction. I, or you the author, can always say "but let's imagine it works".

What is capitalism?

The principle of capitalism is rather simple. Investors provide capital which the company uses to function, the company then repays investors using the profit it generates. To an extent, investing is merely renting money. I give the company a lump sum now, in exchange the company pays dividends to me every month, quarter or year.

You say

And this works so well because the more money you have, the more things you can buy to rent out, and your income just keeps increasing exponentially.

but in reality, the people that make the most money don't lend objects, they lend money. But there's something else I want to address too

companies are a weird case where the company owner is renting the company to their employees, and the employees pay back with a share of the income from their work

I think this is backwards. Workers rent their time to the company. Working isn't a privilege companies bestow on the common folk, it's a contract. You give up your time, in exchange the company pays you. In other terms, it's people renting themselves to the company.

Under capitalism, a company must generate profit. But where does profit comes from? It's not quite like babies, dollar bills don't just multiply. Profit comes from added value. You take a commodity, transform it, and sell it, and somehow it's suddenly worth more, go figure.

Okay, how do you add value? With work.

The system thus requires two things: investment and work. Without work, there's no added value, there's no profit, there's no reason to invest. Without investment, well there's no money to get value in the first place, let alone to add to it, so obviously there's no work.

If you view investment and work as forms of rent, bad news, your society will be radically different. Barring massive growth in generosity, most people will just stop doing their work and maybe focus on their immediate survival. You might grow tomatoes, I might grow potatoes, we might exchange fruits and vegs as neighbours, and nobody will be making iPhones for us.

But here's a thought: what if growing tomatoes and potatoes made us happy, but we don't because we want to afford that iPhone?

Where do inequalities come from?

We all chip in, doing our bit of work for the good of the society, or investing money so people can work. One problem is immediate, we don't contribute equally, in fact some people can't even contribute because there's not enough jobs around. Then another problem, all contributions are not valued equally.

The engineer that designs the car, the worker that screws the wheels on, and the billionaire that finances the factory, it's hard to objectively quantify the contribution of everybody because nobody can do anything alone. So how the hell do you figure how much any of them should get in return?

So the heart of the problem is wealth is redistributed according to rather wonky rules. Let's change that. Tax profits and dividends, nationalise companies if you have to, and then redistribute the wealth to citizens according to their needs. Congratulations, you've just invented socialism. And don't you complain, you're the one who wanted to eliminate rent anyways.

I was promised this was going somewhere

You say

A single person, no matter how hard working, can only produce only so much value per 24 hours.

It's immediately clear why you get paid. You add value, ergo you generate wealth, so it comes back to you. But you spend all that time thinking about value that you forget the perhaps most important word in that quote: person. People. Humans. Us. It's simple really, take away all the jobs, as many as you can.

Wait, what?

The truth is we don't have enough jobs for everybody, and we'll have even less in the future, and that's great news. We aren't the only things capable of adding value. Machines do that very well in a lot of industries, and often much better and at cheaper cost than us. The more humans you put out of a job, the more efficient and cheaper to run your economy is. You can generate more wealth through automation, and then redistribute that wealth to the people. Let the future be an automated socialist paradise.

And then what?

Then we all get a living wage. You don't have to work to put food on the table or a roof over your head, those needs are provided for. So instead you work for yourself. Whatever you feel like, maybe creating art, learning how to bake bread, doing science experiments. Imagine all the things you've always dreamt about doing that you never could because too busy with work or not profitable enough. Well now, you get to do it. And if that's growing tomatoes and potatoes for the neighbourhood, why not.

Is this an equal society? Probably not. I mean, someone will always profit more. But at that point you're living the best life you can, what is there left to aspire to?

In conclusion

Inequalities are born from one thing really, and that's putting wealth, profit, value, money, and all that crap at the top of the priority list.
Just try putting people first.

And if you work that answer backwards, you'll see it starts with people doing what they want to do, figuring a way to maintain an economy without human-intervention, and then a bunch of nonsense about things that have no meaning like money and work.

And remember, this is fiction. I can always say "but let's imagine it works".

$\begingroup$Don't forget that not everyone can or will contribute equally. Some of us are smart, some of us are dumb. Some of us are thoughtful, some of us are rash. Some of us are big, some of us are small. Some of us are strong, some of us are weak. Human nature makes us all fill a lot of wide dimensions of variability. Humans are not interchangeable. Even from the day we are born, we have our own special expression of humanity. We are, still equal in at least one respect. Equal in the eyes of justice, theoretically.$\endgroup$
– kleer001Oct 8 '19 at 21:54

Modern capitalism is considered as the most successful form of economy
(and it clearly works better than, say, communism), but it too has its
flaws. One of the most glaring ones (in my opinion) is the ability for
rich people to get richer infinitely, eventually resulting in what is
known as "large income inequality" - a handful of super-rich people
own everything and vast swaths of poor people work for scraps in order
to make the super-rich people even richer.

But, is this actually true? Firstly, those that consider it the most successful form of economy, are not exactly without bias, I suspect. Secondly, which success-criteria are we judging this by - and are they the right ones? Finally, even if we accept the claim, that it has been the most successful, we have to add '... so far'; there may very well be factors in the future, which will make our current economic system untenable - we can't say, because we don't know the future.

The other claim that grates a bit is that capitalism 'clearly works better than communism'. What we know is that the forms of government that have been labeled 'communism' in the 20th century have largely underperformed the ones that have self-identified as 'capitalism', but of course, that is based on criteria that naturally favour capitalism. One might consider whether monetary wealth is necessarily the best criterion for societal success.

I also think it is worth thinking about whether we in the West have understood communism well enough, not to mention the question of who gets to define the concept at all. The Chinese definition is clearly vastly diferent from both the American and the Soviet ones; and China is on the path to outperform the US at the moment. I'm not saying that communism is The Right Way - only that the issue you raise is much more complex than what you seem to assume.

So, to your question: Could a better way be constructed? To answer that, we have to decide what would be better - to me, it would be something that is sustainable in the long term, and allows all individuals the freedom to seek their own happiness within the constraints of responsibility etc. Consumerism, transnational corporations, and the myth of never-ending economic growth are clearly not sustainable on a planet with finite resources, so these must be eliminated.

What, then are we left with? Perhaps one could describe it as 'pragmatic socialism', of a sort; a society where independent, critical thinking are taught from an early age, and where all moral values are based on common sense rather than religion. Where many things are likely to be owned in common, when it makes sense - things like infrastructure and larger enterprises.

$\begingroup$That is... very nice, and I like it, but... unfortunately doesn't really answer the question as it was posted. :( But good catch! Yes, the criteria for "success" does indeed need some thought.$\endgroup$
– Vilx-Oct 3 '19 at 10:34

$\begingroup$Sorry - I got carried away :-) However, I think what you are describing is something that in many ways look a bit like what I ended up with. Investment is a form of money-lending, which is a form of rent: you let others use your money for a while, for payment; so how could one invest in business? Only by joining together in a form of shared ownership. And why would you invest in this way? Only if that would benefit you directly in some way.$\endgroup$
– j4nd3r53nOct 3 '19 at 10:43

$\begingroup$Just a followup on my comment: So, yes, I think your system could well work.$\endgroup$
– j4nd3r53nOct 3 '19 at 10:44

$\begingroup$China is de facto not communist, even if the ruling Communist Party claims to be so.$\endgroup$
– March HoOct 3 '19 at 15:13

$\begingroup$"But, is this actually true?" Would you rather live now in South Korea or North Korea? Would you rather live in the 1980s in East German or West Germany?$\endgroup$
– kleer001Oct 3 '19 at 16:57